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UA - PMGT 3013 - Class Notes - Week 4

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UA - PMGT 3013 - Class Notes - Week 4

School: University of Arkansas
Department: Management
Course: Honors Strategic Management
Professor: Vikas Anand
Term: Fall 2016
Tags: honors, Strategic, and Management
Name: week 4 honors strategic management notes
Description: ch 3 and 4 honors strategic management notes
Uploaded: 09/19/2016
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background image CH 3 external analysis: industry structure, competitive forces, and strategic groups Tesla motors and the us automotive industry Hard to get into the market because you need to have large scale production Elon musk owns tesla and does electric cars and so he doesn’t need large  scale production to be competitive.  Model s has been very successful 1) Pestel framework: categorizes and analyzes an important set of external factors  that might impinge upon a firm. These factors create both threats and 
opportunities 
a) Political, economic, sociocultural, technological, ecological, legal
b) Task environment: do have control over
c) General environment: don’t have control over
i) Political factors: result from the processes and actions of government  bodies that can influence the decisions and behavior of a firm
(1) Nonmarket strategies: lobbying, pr, contributions, litigation, etc
ii) Economic factors (1) Growth rates: measure of the change in the real amt of goods and  services produced by a nations economy (2) Real growth rate: adjusts for inflation. Whether business is expanding  or contracting (3) Levels of unemployment
(4) Interest rates: amount creditors are paid for use of their money and the
amt that debtors pay for that use, adjusted for inflation  (5) Price stability: lack of change in price levels of goods and services –  rare
(a) Inflation: rising prices
(b) Deflation: decrease in price
(6) Currency exchange rates: determines how many dollars one must pay  for a unit of foreign currency iii) Sociocultural factors: capture a society’s cultures, norms, and values (1) Demographic: population characteristics iv) Technological factors: capture the application of knowledge to create new  processes and products
(1) Lean manufacturing, six sigma quality, biotechnology, nanotechnology
(2) Blackberry: failed both sociological and technological factors
v) Ecological factors: environment, global warming, sustainable economic  growth  vi) Legal factors: official outcomes of political processes as manifested in  laws, mandates, regulations, and court decisions 2) Industry structure and firm strategy: five forces model a) Industry: group of incumbent co.s facing same set of suppliers and buyers
b) Industry analysis: method to identify an industry’s profit potential and derive 
implications for a frims strategic position w/in an industry c) Strategic position: firm’s strategic profile based on the diff b/w value creation  and cost (v-c)
background image d) Five forces model: 5 forces that determine the profit potential of an industry  and shape a firms comp adv e) Competition in the 5 forces model i) Economic value: v-c
ii) Competitors: buyers, suppliers, potential new entry of other firms, 
substitutes iii) The stronger the 5, the lower the profit potential and vice versa
iv) Airline industry: high rivalry, powerful buyers (can price compare online), 
entry barriers low, supplier power strong, substitutes high v) 1. Threat of new entry
vi) 2. Power of suppliers
vii)3. Power of buyers
viii)
4. Threat of substitutes ix) 5. Rivalry among existing competitors f) Threat of entry: risk potential competitors will enter the industry i) 1. Existing firms may lower prices and make industry less appealing
ii) 2. Existing firms could spend more to satisfy existing customers ex. 
Starbucks iii) Entry barriers (1) Economies of scale: cost advantages that accrue to firms w/ larger  output because they can spread fixed costs over more units, employ 
tech better, benefit from a more specialized division of labor, and 
demand btter terms from suppliers
(2) Networking effects: positive effect one user of a product or service has  on the value of that product or service to other users
(a) Threat of new entry decreases when network effects are present
(3) Customer switching costs: moving one supplier to another
(4) Capital requirements: price of the entry ticket
(5) Advantages independent of size: brand loyalty, technology, raw 
materials, distribution channels, location, experience (6) Gov policy: threat of entry is high when no gov policies
(7) Credible threat of retaliation by existing companies
g) Power of suppliers i) Pwrful suppliers can raie the cost of production by demanding higher  prices for their inputs or by reducing the quality of the input factor or 
service level delivered.
ii) Threat to industry cuz they reduce the industry’s profit potential by  capturing part of the economic value created iii) Power of suppliers is high when:  (1) Suppliers industry is more concentrated than the industry it sells to
(2) Suppliers don’t depend heavily on the industry for a large portion of 
their revenues (3) Siginificant switching costs
(4) Differentiated products
(5) No readily available substitutes
(6) Threat of forward-integration
h) Power of buyers

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School: University of Arkansas
Department: Management
Course: Honors Strategic Management
Professor: Vikas Anand
Term: Fall 2016
Tags: honors, Strategic, and Management
Name: week 4 honors strategic management notes
Description: ch 3 and 4 honors strategic management notes
Uploaded: 09/19/2016
7 Pages 14 Views 11 Unlocks
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  • Notes, Study Guides, Flashcards + More!
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